Volume 160, Issue 3 
February 2012
Articles

Pills and Partisans: Understanding Takeover Defenses

Jordan M. Barry & John William Hatfield

Corporate takeover defenses have long been a focal point of academic and popular attention. However, no consensus exists on such fundamental questions as why different corporations adopt varying levels of defenses and whether defenses benefit or harm target corporations’ shareholders or society generally. Much of the disagreement surrounding takeover defenses stems from the lack of a fully developed formal analytical framework for considering their effects. Our Article presents several formal models built upon a common core of assumptions that together create such a theoretical framework. These models incorporate the reality that target corporate insiders have superior information about the target but are imperfect agents of its shareholders. They suggest that modern defenses enable target shareholders to extract value from acquirers by empowering corporate insiders, but that takeover defenses do not benefit society as a whole. They also help explain why corporations with different characteristics may choose to adopt varying levels of takeover defenses. Our findings have implications for the longstanding debate about who is best served by state-level control of corporate law and the desirability of increased federal involvement in corporate law.


Congress’s Constitution

Josh Chafetz

Congress has significantly more constitutional power than we are accustomed to seeing it exercise. By failing to make effective use of its power, Congress has invited the other branches to fill the vacuum, resulting in a constitutional imbalance. This Article considers a number of constitutional tools that individual houses—and even individual members—of Congress, acting alone, can deploy in interbranch conflicts.

Although the congressional powers discussed in this Article are clearly contemplated in constitutional text, history, and structure, many of them have received only scant treatment in isolation. More importantly, they have never before been considered in concert as a set of tools in an ongoing interbranch power struggle. This holistic perspective is necessary because these powers in combination are much greater than the sum of their parts. Borrowing terminology from international relations scholarship, this Article groups the congressional powers under discussion into "hard" and "soft" varieties. Congressional hard powers are tangible and coercive; the hard powers discussed in this Article are the power of the purse and the contempt power. Congressional soft powers are intangible and persuasive; soft powers considered by this Article include Congress’s freedom of speech and debate, the houses’ disciplinary power over their own members, and their power to determine the rules of their proceedings. Each of these powers presents opportunities for Congress to enhance its standing with the public, and thereby enhance its power. This Article aims to demonstrate both the ways in which these powers are mutually supporting and reinforcing and the ways in which Congress underutilizes them. In doing so, the Article examines a number of examples of congressional use of, and failure to use, these powers, including the release of the Pentagon Papers, the 1995–1996 government shutdowns and 2011 near-shutdown, the 2007–2009 contempt-of-Congress proceedings against White House officials, and the use of the filibuster, among others.

The Article concludes by arguing that Congress should make a more vigorous use of these powers and by considering their implications for the separation of powers more generally.


Prison Vouchers

Alexander Volokh

School vouchers have been proposed as a way to bypass the political pathologies of school reform and improve school quality by transforming students and parents into consumers. What if we did the same for prisons—what if convicted criminals could choose their prison rather than being assigned bureaucratically?

Under a voucher system, prisons would compete for prisoners, meaning that the prisons will adopt policies prisoners value. Prisons would become more constitutionally flexible—faith-based prisons, now of dubious legality, would be fully constitutional, and prisons would also have increased freedom to offer valued benefits in exchange for the waiver of constitutional rights. As far as prison quality goes, the advantages of vouchers would plausibly include greater security, higher-quality health care, and better educational opportunities—features that prison reformers favor for their rehabilitative value.

The counterarguments are threefold. "Social meaning" and other philosophical arguments hold that choice in prison conditions is either impossible or morally undesirable. On the more economic plane, "market failure" arguments hold that because of informational or other problems prisoner choice would not succeed in improving overall prison quality. "Market success" arguments, on the other hand, hold that prison choice would improve prison quality too much, satisfying inmate preferences that are socially undesirable or diluting the deterrent value of prison. These counterarguments have substantial force but do not foreclose the possibility that prison choice results in socially desirable improvements that could outweigh these disadvantages.


Comments

Chevron Corp. v. Berlinger and the Future of the Journalists' Privilege for Documentary Filmmakers

Tom Isler

The documentary film Crude, directed by award-winning filmmaker Joseph Berlinger, tells the story of a class action lawsuit brought by thousands of Ecuadorians against the oil company Chevron, alleging that the company’s systematic contamination of a portion of the Amazon jungle increased the rates of cancer, leukemia, birth defects, and other health problems for the indigenous people of the region. Berlinger and his crew spent three years filming but captured only a small portion of the ongoing fight between the Ecuadorians and Chevron. By the time Berlinger’s cameras arrived, the legal battle was already a dozen years old, and a title screen at the end of Crude predicts that the litigation could last another decade. The film premiered at the 2009 Sundance Film Festival and went on to earn dozens of nominations and awards from film festival juries and critics’ organizations around the world.

In 2010, Chevron and, separately, two of Chevron’s lawyers who were facing criminal charges in Ecuador for falsifying documents, moved to subpoena nearly six-hundred hours of raw footage, or “outtakes,” that Berlinger did not include in the completed film. Chevron sought to prove that the plaintiffs’ lawyers exerted improper influence over judges and experts involved in the proceedings in Ecuador through ex parte communications, and it argued that Berlinger’s footage contained evidence of this misconduct. Berlinger attempted to quash the subpoenas on the ground that he was protected by the journalists’ privilege.

The district court ordered Berlinger to turn over all of his outtakes—the largest mandate to turn over outtakes ever ordered by a U.S. court. In doing so, the court revealed its misunderstanding of outtakes and how they should be treated under the existing journalists’ privilege doctrine. The Second Circuit’s standard for obtaining nonconfidential material from journalists, set forth in Gonzales v. NBC, requires petitioners to prove that the material sought is “of likely relevance to a significant issue in the case” and “not reasonably obtainable from other available sources.” The district court in the Berlinger litigation, after assuming that this qualified privilege applies to independent documentary filmmakers, narrowed the protection of journalistic work product by collapsing the two-pronged Gonzales test into a general standard of “likely relevance” for outtakes, and lowered the bar for what constitutes relevance. The Second Circuit narrowed but nonetheless affirmed the order. The Second Circuit further ruled that because Berlinger appeared to be subject to the influence of his filmmaking subjects, he lacked the editorial independence necessary to qualify for the journalists’ privilege.


Allocating the Costs of Harm to Whom They Are Due: Modifying the Collateral Source Rule after Health Care Reform

Rebecca Levenson

For decades, the collateral source rule has been a target of tort reform on both state and national levels.1 The rule, which at common law prohibits the introduction of evidence regarding collateral payments received by the claimant in a suit for damages, has sparked a long-standing debate. Its proponents cite its potential to align the costs of injury with tortfeasors and to deter tortious conduct, while its opponents claim that the rule results in double recovery for claimants and inflated insurance costs. The result of this debate has been varied treatment of the rule, with some states following the common law rule, some limiting its application, and some abrogating it in full. Calls for tort reform have been widely influential throughout the states. Most states have already limited or abrogated the rule, and it is possible that other states as well as the federal government may follow suit.

The application of the collateral source rule has become more complicated since the passage of the Patient Protection and Affordable Care Act, which contains a provision establishing an individual mandate to obtain health insurance. While the insured plaintiff may have benefitted from the collateral source rule before the Affordable Care Act was passed, now an uninsured claimant may benefit under the rule. Under the common law collateral source rule, evidence that a plaintiff has chosen to shirk his obligation to purchase insurance must be excluded. The rule’s ban of insurance evidence may have the result of protecting—as opposed to penalizing—uninsured claimants. The decision to forgo insurance that may have covered the uninsured claimants’ medical expenses is hidden from the jury, whose members presumably have complied with the mandate. Under the new health care law, both insured and uninsured plaintiffs stand to gain from the use of the collateral source rule. This outcome may provide an additional incentive for states and the federal government to limit or change the common law rule.

Although commentators have put forth many arguments both supporting and opposing the use of the collateral source rule, they have proposed fewer models for its revision. This Comment will provide a model for updating and partially abrogating the collateral source rule in personal injury cases. It will examine the effect that the model will have on the outcome of these cases and the fulfillment of new policy goals in the wake of health care reform. Part I will explain the current state of the collateral source rule and will provide an overview of how it has been changed across the states. Part II will summarize the debate surrounding the elimination of the rule. Part III will address how the Affordable Care Act has changed this debate. Part IV will evaluate the consequences of modifying the collateral source rule in personal injury cases. Finally, Part V will provide a model for limiting the rule.


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